FDs hardly provide 4-5% interest these days and NCDs are risky, so what's the option for investors with low risk appetite?

Bonds
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I did a Reddit post about this earlier but I guess I didn’t get satisfactory answers to my question.

Firstly, I want to know why do FDs offer such abysmally low interest rates these days? Even a senior citizen hardly gets anything above 5% today! Is the economy going downhill or people have just stopped borrowing credit from banks for some reason?

Secondly, NCD is a lucrative option for those who want a stable income stream but even highly rated companies have started defaulting on NCDs these days. As I had stated in the reddit post, two highly rated companies (DHFL and Future Enterprises) defaulted on their NCD interest payouts. Ironically, DHFL was rated AAA (highest possible) by rating agencies CARE and Brickworks but changed them to D (Defaulter) just after this incident. I just don’t understand whom to trust in this scenario. I just want to know two things:

  1. Are there any good bonds or NCDs which have a long history of paying interests and not defaulting?
  2. What are some good strategies (and or sites, articles, etc.) to find such good bonds or NCDs?
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Debt Mutual funds can be stable option but you would need to understand its cycles and its largely interest rates dependent .

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What you’re looking for is getting maximum returns by risking/doing very little to get those returns… Unfortunately, LAZY RETURNS ARE HISTORY my brother.

There are no more high returns for people with low risk appetite. Easy returns with low risk are history. Bonds, NCDs, Fixed Deposits etc can be part of a larger portfolio but not the centre of the dish. By the way, Banks can collapse too, so can their FDs, Debt funds can collapse, Govt companies can also collapse, but I’m sure you know that already.

Today, not taking on risk, is the highest risk you could take.

The only way to get better returns now is by doing more with your time in addition to taking on more risk. No other way. And sticking to this for the ‘long term’.

D.I.V.E.R.S.I.F.Y.

Start a small business
Own a farm (could be big or small) and knowing how to grow your own food
Learn a skill that makes a side income eg Yoga, Baking etc (and then further investing this side income)
Gold & Silver (more physical, less digital, less ETF)
Commercial real estate (eg warehousing)
Stocks and MF (SIPs are overrated, patience to buy when the markets collapse is underrated. Best is SIP but keep chunk aside for investing when the markets collapse)
A very little bit in assets that seem absurd in the beginning but gives disproportionate returns in the future (eg Crypto, NFT)
A little bit in tax efficient ULIP (Btw ULIPs are not risk free/‘guaranteed’ as advisors say. What happens if the Bonds bought by the fund manager collapse?)
And of course a little bit in fixed income instruments, are the way to go.

And giving them all ‘TIME’.

All of these require dedicated research and maybe also hiring an expert. But doing own research very important.

As for bonds, fixed income… RBI bonds give 7+ interest. It’s floating but rates may begin to move up so it should move up higher too. Some other Govt schemes have 6%+ interest rate as well. Just that they come in with a lock-in period. RBI bonds have a 7 year lock in, you can research the Govt schemes, it’s easy (Kisaan Vikas Patra, PPF, EPF, VPF etc). You can also go for bonds of govt companies. But the returns of all of these aren’t as high as you would want. And risks exist, even if negligible.

However, I would advise you to do a little research about each asset class and see how it works best for you, and not just stick to Bonds and NCDs.

The Governments of the world have gotten into printing money as a quick fix to everything. This will not work out well for people who refuse to move on from Bonds, FDs and NCDs. A keeping a small amount aside in the bank or fixed instruments is fine and useful in times of emergencies or to capitalise on investment opportunities (eg stock market collapse of March 2020), but not a good survival strategy.

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@amresh_varshney How can I find well performing debut mutual funds which have a history of consistent returns?

Can I purchase these funds through the secondary market (BSE/NSE) or is there another route to it?

@Zubin Owning a farm and creating produce comes with its own risks and uncertainties in a country like India, isn’t it? Besides, it also needs heavy investment and operational skills. And applying skills like yoga and baking is something we already do, I’m looking for only passive investment returns here. And speaking of research, can you point me to any good articles, links, books, etc. for researching good bonds/NCDs in India?

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You may try SDL. https://coin.zerodha.com/dashboard/gsec

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@john_wise : https://www.youtube.com/watch?v=0I68yyBwcno . Basic of debt funds video. If you are trading then coin is the best platform available other wise you may go with kuvera for mutual funds . Debt Mutual funds are not traded on NSE/BSE so Coin or kuvera are platform for you to invest. one thing i learnt is in debt funds bigger the fund the better it performs and rotate money among different type debt funds in 2-3 years cycle. You have to follow interest rates cycles/RBI bimonthly policies and rotate your money in different funds. Youtube has some good material/info on debt funds cycle.

You may only be able to outperform the FD’s ( max you can outperform by 3-6% p.a) if you have large capitals above 25 lacs( otherwise its no use below this amount its won’t matter much ,its safe in FD)+ knowledge of cycles and instruments. For knowledge there are lots of resources available.

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: interest rates

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source : Best Debt Mutual Fund Guide for Beginners | How to Invest in Debt Funds? | What is Debt Fund? - YouTube

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Thanks for the interest rate chart, its an eye opener! This shows that present interest rates are even lower than 2008, this has to be the worst recession judging by the interest rates. This also tells you that now is probably the worst time to make an FD. The best time is when it shoots above 7% and then make a long-term FD for 7-10 years. But will such a time ever come!

Also, this is the RBI’s interest rate, isn’t it? Are the FD interests given by ICICI, SBI, etc. linked to this RBI’s rate?

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You are right best time to make FD around 7-8 % for 10 years , it should come as peak in next 1-3 years. RBI has said it won’t increase or decrease any interest rate this year, so Yields should peak out after 2021-2022.

Also for any developing country to become developed interest rates has to drop that how the cycle works, current govt has lots of tools to curb the yield and as govt spending is increasing YOY , it might happen that interest rates might not go up much .

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Big returns comes with Medium RISK.

“Invoice Discounting” Which can fetch up to 11-12% for annual returns but analysis and risk involved.

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If you are willing to take a liitle risk & diversify your FD portofolio (hoping RBI/Govt of india’s ₹5 lakh guarantee on Fd principal amount will save you )
Indusind bank,Equitas small finance bank, Bandhan bank, DCB , (LVB after coming under DBS are honuring existing old high FD deposit rates but reduced new fd rates)
KVB,CUB,SIB and many more private banks (avoid kotak,sbi,
you are loosing 2-3% on FD minimum due to inflation. but you are doing it to due to safety & liquidity in a emergency (never mind penalty)
as a senior I average avove 6% by & large

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Hi,
I also had this problem with my father’s Fund before 3.5 yrs (12 lac)

Although I am an investor & trader but I didn’t wanted to invest papa’s fund in direct exposure and on other side FD returns were low as you said (4-5%)

Then my Investor &trader mind gave me below solution.

I kept my father’s fund in FD only
But I invested the intrest amount from his fund in
Equity stocks of my list of 9 stocks

Although could do many trading strategies as I do in my personal regular funds

But I kept it simple and did trading and investing in good stocks as per my experience.

It worked well. Invested almost 1.50 lacs in three years but got return of 2.50 lacs. So total now his capital return is (1.50 lac normal intrest +2.50 lac returns from investing his intrest= 4lac)
And continuing…

So technically generated more than double returns of FD with 100% safety of capital :innocent:

Question-What worst could happen?
Ans - his intrest could have been lost

Question-what is best part
Ans- his capital was fully safe

Question-Who can do that?
Ans- maybe everyone who is not only dependent on that FD income & know simple steps of basic fundamentals and technical of investing like supply demand etc.

I don’t know weather it will help you or not, but helped to plan my Papa fund parking

Contact if need any query
WhatsApp-8586943669

Warm regards
Sorabh dhiman

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I feel your frustration and pain. It seems like everything is corrupt.

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sell options, its the only way

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This is another good strategy to keep a balance between protecting the capital of a senior citizen and then taking risk on interest amount in equity markets.

You can also try Post Office MIS Scheme. It comes with Sovereign Guarantee. Current interest rate is 6.6% (Govt may reduce int rate after June, once election is over). Interest is monthly credited to Post Office Savings Account. Open a IPPB account so you don’t have to visit Post office to collect the interest amount and you can transfer it to your bank account through the mobile app only.

A single account holder can open MIS account of upto Rs 4.5 Lakh (monthly interest Rs 2475 @6.6% int rate) and joint account holders can invest upto Rs 9 Lakh (monthly interest Rs 4950 @ 6.6.% int rate).

One can invest this monthly interest amount in stocks or equity mutual fund SIP. This protects the capital and takes risk of equity market as well with interest amount every month.

P.S the MIS account comes with a 5 year lock-in. And pre-mature withdrawal costs you 1-2% penalty.

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Awsome Mr rupesh, that will be great to implement. As it will protect capital too…

Thanks for value addition.